While some businesses may make the decision on their own to prioritize diversity in their supply chains, others do so as a result of mounting pressure from various stakeholders. Whether its clients, investors or employees, this demand reflects broader social trends toward inclusivity and equality. So, while the focus on sourcing goods and services from a variety of suppliers, especially those from underrepresented groups is not new, the intensity of this external influence is certainly growing.
Client expectations
At the top of the list of drivers of supplier diversity are clients. Their shifting attitudes around issues such as environmental sustainability, social justice and inclusivity have pushed corporations and government agencies to implement supplier diversity programs and establish goals in this regard.
This increase in demand for greater diversity is partly the result of consumers becoming more informed about the practices of the companies they support. With this heightened awareness, they actively seek out companies that are aligned with their values and reflect the consumer base and community where they do business. For example, brands like Coca-Cola, Target, and Procter & Gamble have incorporated supplier diversity into their corporate social responsibility strategies, understanding that modern consumers want to feel that the businesses they purchase from are contributing to positive change.
A business’s supplier diversity practices come into play when establishing or maintaining contracts with large clients, particularly those in sectors such as government, technology and healthcare. The contract may include explicit provisions that suppliers engage with diverse vendors. For instance, the U.S. government mandates a certain percentage of federal contracts go to small businesses, including those owned by minorities, women and veterans. And while the Canadian government doesn’t have specific quotas, there are programs such as the Procurement Strategy for Aboriginal Business (PSAB) to encourage the participation of Indigenous-owned businesses. And although it is not directly connected to procurement, the Federal Contractors Program (FCP) helps to ensure greater representation of women, people with disabilities and members of visible minorities in contracting processes. As clients in both the private and public sectors emphasize diversity, businesses are compelled to follow suit, integrating diverse suppliers into their operations.
Investor demands
Investors have also become a driving force behind supplier diversity. This is most evident with the rise of environmental, social and governance (ESG) factors to evaluate and select investments. Indeed, this has allowed for a shift from focusing solely on a company’s financial performance to considering its broader impact on society. In fact, investors, even at the institutional level, have begun recognizing that companies with strong diversity, equity, inclusion (DEI) initiatives are more likely to succeed in the long run.
For the modern investor, diversity is viewed as a competitive advantage that supports business resilience and responsiveness to changing market conditions. It is also seen as a way to expand into new markets, encourage price competition and positively impact a community’s economic growth alongside corporate revenues. For example, a 2023 report from McKinsey & Company found that companies with greater gender and ethnic diversity on their executive teams were 9% mire likely to outperform their peers.
In addition to the funds in which they invest, shareholders are using their voice and influence to advocate for stronger diversity initiatives, often pushing for more transparency and accountability. They are also demanding clear metrics on supplier diversity, and should a company fail to meet these expectations, this can damage their reputation and result in a loss of investor confidence, which can directly affect stock prices and market valuation.
Employee Pressures
The influence of employees on supplier diversity has also increased. With a changing workforce, they are speaking out about the values they wish to see upheld by their employers. For many, in particular those from younger generations such as millennials and Generation Z, this means prioritizing diversity and inclusion both in the workplace and in business practices.
Supplier diversity is seen as an extension of their employer’s internal commitment to creating an inclusive and equitable environment. Conversely, a lack of diversity in the supply chain can raise concerns about the company’s overall commitment to DEI. Research has shown that this can also have an impact on a business’s ability to retain top talent and foster higher levels of employee engagement.
What’s more, in the age of social media, disgruntled employees can quickly voice their concerns, bringing attention to companies that fail to respond to these pressures. This can be damaging, particularly if it results in negative press calling out the business for its lack of commitment to diversity.
The business case for supplier diversity
For businesses, these pressures from clients, investors and employees should not only be considered as obligations, but as an opportunity for growth. Seen in this light, supplier diversity can open doors to new markets, enhance innovation and improve the company’s reputation. Additionally, diverse suppliers often bring unique strengths to the table. Many minority-owned and women-owned businesses have specialized expertise or offer niche products that large corporations might not otherwise have access to. Incorporating this type of supplier can give businesses a competitive edge and help them better cater to the diverse needs of their clients.
There is no question that the pressure to increase supplier diversity is mounting from clients, investors and employees. As a result, businesses must recognize the importance of building diverse supply chains and also acknowledge the benefits: stronger relationships with clients, more engaged employees, and a more resilient, innovative business model. As society in general becomes more focused on fairness and equality, businesses that follow suit will not only meet the expectations of their stakeholders but will also position themselves as leaders.
Maïa Inclusive Growth's role
As a project of the Quebec Business Women’s Network (QBWN/RFAQ), one of our main goals is building awareness and education through training and workshops on an array of topics. So, if you are a large business seeking to overcome challenges and engage with diverse suppliers, we are here to provide you with the information you need and to offer guidance. Maïa Connex is also a platform that serves as a hub for business opportunities across Canada, and we hold networking events along with our partners.
Regardless of where you are in your journey with supplier diversity, we encourage you to sign up for our training programs, which are offered online here :
To take your network of diverse suppliers to the next level, or to facilitate your integration into supply chains, join our platform. We also invite you to sign up to stay tuned for future blog posts. In addition, you will be notified of any updates and upcoming workshops.
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